Business Finance 101

---

What it means:
The percentage of each dollar you keep.

Example:

• Profit = $1,500 
• Revenue = $5,000
  👉 Profit Margin = 30% 

Why it matters:
Higher margin = more efficient business
Low margin = you may be underpricing or overspending

What it means:
How many sales you need to cover all your costs.

Example:

• Fixed costs = $2,000 (rent, bills) 
• Price per product = $50 
• Cost per product = $20 

👉 Break-even = 2,000 ÷ (50 − 20) = 67 sales

Why it matters:
This tells you your minimum target every month

What it means:
How much it costs to produce one item.

Example:

• Total costs = $1,000 
• Units = 100 

👉 Cost per unit = $10

Why it matters:
You must price ABOVE this to make profit.

What it means:
How much you earn compared to what you invested.

Example:

• Invested = $1,000 
• Returned = $1,500 

👉 ROI = 50%

Why it matters:
Helps you decide if something is worth doing (ads, equipment, etc.)

What it means:
How much of your income goes toward debt.

Example:

• Monthly debt = $1,000 
• Monthly income = $4,000 

👉 DTI = 25%

Why it matters:
Lenders use this to decide if you qualify for loans.

• Profit = “Did I make money?” 
• Margin = “How good is my business?” 
• Break-even = “How many do I need to sell?” 
• Cost per unit = “What’s my real cost?” 
• ROI = “Was this worth it?” 
• DTI = “Can I afford more debt?”